Although corporate finance executives and regulators might be focused on Enron CFO Andrew Fastow’s svelte use of partnerships and Sherron Watkins’ dramatic testimony, they could be missing a story with bigger long-range impact. American workers now seriously mistrust the safety of their employee retirement accounts.
While the Financial Accounting Standards Board and the SEC mull ways to improve accounting procedures, the results of a recent poll by the Pew Research Center for the People & the Press suggest that regulators might want to also look at educating employees just a little better. Fifty-eight percent of the 1,199 adults responding to the nationwide poll conducted February 12 to February 18 said that the big news from Enron was that defined-contribution plans were riskier than they thought.
What’s more, a greater number of respondents with stock-based accounts are more worried about their retirement fortunes than are those who lack such risks. Forty percent of those with equity in their retirement accounts said they’re edgier since the Enron debacle, compared with 36 percent of those with non-market retirement accounts, and 29 percent of those who rely completely on Social Security.
This overall anxiety about equity investments in pension plans is likely to put reforms of company stock ownership on a fast track in Congress. Among the current bills: one pushed by President Bush that would enable account holders to sell company stock after three years in the plan, and one sponsored by Senators Corzine and Boxer that would cap 401(k) investments in company stock at 20 percent.
Indeed, the survey supplies proof of the kind of moral outrage that yields legislative results: Seventy percent say Enron employees’ loss of retirement funds is either the worst or second worst thing about the Enron mess. The fact that executives like former Enron CEO Kenneth Lay apparently made out okay while the company fell apart ranked second in respondent ire (59 percent).
FASB and the SEC will have to look elsewhere for public support of their regulatory efforts, however. Only about 26 percent of the respondents were in high dudgeon about the possibility that accounting firms might be untrustworthy. About a quarter of the respondents said they were angriest about the fact that political leaders might be involved in the world’s biggest corporate downfall. Clearly, lawmakers have gotten on the right side of this issue: usually, politicians come in for a public beating when there’s a regulatory scandal.